Fair Use and Innovation strange bedfellows

Copyright will command its fair share of headlines in 2016 as a result of court cases, new legislation and ongoing policy debates surrounding a possible move to a "fair use" system.

Government’s innovation agenda undermined by its own proposed copyright reforms

Village Roadshow and Foxtel recently launched the first cases in Australia since site blocking legislation passed last year enabling rights holders to seek to block websites primarily set up to facilitate online piracy.

A chorus of critics has already doomed site blocking to certain failure without quoting any evidence and many say it is somehow the content owner's fault that people steal. Let's examine some facts.

Site blocking has been adopted by 32 countries with thirteen having successfully had cases processed through the courts. Research by Carnegie Mellon University in 2015 showed that persistent website blocking of a number of piracy sites has effectively migrated pirates to legal channels.

A UK Site Blocking Efficacy Study by Icopro in 2015 compared site visits in February, 2014 to those one month prior to site blocks and found that visits to all blocked sites declined by more than 90 per cent. Some will deride the laws as people can easily circumvent site blocks with a virtual private network (VPN), but facts show that most don't.

The notion that the content industry has brought the scourge of piracy upon itself through failing to innovate is another myth.

The proliferation of digital platforms with film and TV content available on any device at any time at various price points is the goal of our industry. We want our content to be viewed as easily as possible in any way to improve the customer's experience and in the quickest time to market. By and large we are getting there, but no business model can compete with free, which is what piracy is.

Copyright is a 306 year-old construct to reward creation, investment and innovation and is relevant in the digital age now more than ever. The Turnbull Government's innovation agenda is being pushed by ads in print and on television declaring "Welcome to the Ideas Boom".

The recent success of the Aussie tech company Atlassian's initial public offering in the US, the emergence of a new risk appetite for venture capital funding of start-ups in Australia and big business support of innovation hubs like Telstra's muru-D, all demonstrate a noticeable shift in sentiment and action when it comes to innovation.

This is backed up by the launch of new digital entertainment platforms such as the Fairfax Media and Nine Entertainment-owned Stan, Netflix and Foxtel's Presto streaming services joining many others in a crowded and competitive marketplace for limited dollars and eyeballs.

Access Economics last year found that the Australian film and TV sector directly contributed $5.8 billion to Australian gross domestic product (GDP) and about 46,600 full time equivalent employees compared with ISPs that contributed $1.8 billion to the economy.

Our voice is relevant.

All sounds good, right? New digital rights, new platforms and revenue, investment and funding. Why then would the federal government decide to progress headlong down a path that puts this framework for innovation, competition and success at risk?

What you may not be aware of is that the government commissioned the Australian Law Reform Commission (ALRC) to review copyright and it recommended in 2014 an open-ended 'fair use' style system: a classic case of presenting a solution to a problem that doesn't exist.

The government followed up with a Productivity Commission enquiry to consider the ALRC recommendations into fair use and is due to report in April. Last month I was asked to present to government appointed consultants who are doing a separate cost benefit analysis of the ALRC fair use recommendations due to government within weeks.

PwC has also examined the ALRC recommendations to assess the impact and economic costs and benefits of adopting fair use in Australia and in its report last month concluded: "there is no firm evidence supporting a direct causational relationship between fair use and improved economic outcomes for the Australian economy as a whole."

The report also concluded that "given the underlying drivers of the content creation market, it is likely that a transition to fair use will create disincentives to create new original copyright works".

Why would a government jeopardise our industry and may others that rely on clear and unambiguous copyright protections without a demand or need for change and where the risk of getting it wrong is so great?

The only certainty of moving to a US style fair use system is that a significant increase in litigation will be required to determine its boundaries: this is a known policy outcome of such a change.

Copyright in fact does the exact opposite: it allows for a market for products and services and is adaptable by allowing exceptions. The government's own innovation campaign states it is all about rewarding risk, innovation, creating markets and allowing new funding.

We agree.

Australia's balanced copyright system doesn't stop innovation and investment; it requires it. Moving to a fair use model is fraught and by so doing will open another policy battle with only one certain
outcome if adopted: a field day for lawyers.